21 June 2018
The Commonwealth government has released its eagerly awaited Review of Security of Payment Laws.
The plural is telling. It is no news to anyone in the industry that there is different legislation in each State and Territory. This legislation has been repeatedly amended. Unsurprisingly, the first and critical recommendation in the Review of Security of Payment Laws is a call for greater simplicity:
‘Security of payment legislation should seek to promote prompt payment so as to maintain a contractor’s cash flow. Such an outcome is more effectively achieved through adoption of a legislative regime broadly based on the East Coast Model.’
The Review of Security of Payment Laws (Murray Review) was conducted by John Murray AM. Mr Murray is a lawyer and adjudicator, and a former national executive director of the Master Builders Association, among many other appointments.
Mr Murray began his review in December 2016 and consulted over 60 organisations and 20 individuals together representing much of the industry. While Mr Murray submitted his report at the end of 2017, it has only recently been publicly released.
The headline recommendation is that security of payment legislation in Australia be harmonised based on the ‘East Coast Model’. The East Coast Model captures the legislation in the Australian Capital Territory, New South Wales, South Australia, Tasmania, Victoria and Queensland. These Acts differ sharply from those in Western Australia and the Northern Territory.
A moment’s thought reveals many questions. Does the East Coast Model include Queensland’s split between complex and standard claims? Victoria’s ‘excluded amounts’ regime? The New South Wales approach of not requiring payment claims to be endorsed as payment claims under the Act?
In the course of 86 recommendations, the Murray Review deals with these and many other detailed but important questions.
The headline recommendation should not distract from many individually significant recommendations that would affect how contracts are drafted and how claims are made and assessed.
The Murray Review recommends an adjudication system that amalgamates features from many jurisdictions. These are the critical aspects.
The Commonwealth government has not yet endorsed the recommendations in the Murray Review. It seems that there will be a further process of consultation as the government considers the recommendations. If the government does decide to legislate, it might do this through Commonwealth legislation based on the corporations power (although this would not cover every industry participant).
Alternatively, the States and Territories might agree on a scheme which could then be implemented in several ways.
This raises several questions. In Queensland, is there an appetite for further change given existing reform is on foot? Tranches 2 and 3 of the Building Industry Fairness Act 2017 are expected to be implemented in the next six months, and further recommendations from a to-be-established Evaluation Committee are anticipated. There is also the question of the West Coast. Since the Murray Review did not recommend the framework in place in Western Australia and the Northern Territory, there might be concern about the position of those jurisdictions. On 23 February 2018, however, the McGowan Government in Western Australia launched an Industry Advisory Group chaired by prominent barrister John Fiocco to improve security of payments for subcontractors. Importantly, the terms of reference explicitly ask the Industry Advisory Group to consider further issues raised by the Murray Review.
These and other issues are the subject of discussion in the Corrs High Vis podcast on the Murray Review: http://www.corrs.com.au/thinking/insights/corrs-high-vis-episode-26-murray-report-reviewing-the-national-security-of-payment-laws/.
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